Central banks in the U.S. and the eurozone are in various stages of quantitative easing mode. While growth remains anaemic in these regions, easy liquidity policies continue and interest rates stay low. Part of the flood of global liquidity is moving into Asia, driving asset prices (stocks, real estate, currencies). Within the Asian region, China's economic up-cycle is already overheating, and the government is determined to hold the renminbi down (to fight hot money inflows) and deflate the property price bubble. In contrast, major ASEAN economies are still in the early phases of their economic up-cycles. Capital inflows into ASEAN thus look set to continue.

As domestic sectors in these economies boom, surpluses in trade and current accounts will shrink. The key question then is: should a current account deficit surface, how would that be funded? If funded by FDI (foreign direct investments), it would be hugely positive. If financed through external debt, then sooner rather than later the party will end.

The key to attracting FDI is strong and effective government leadership to break up corruption, cronyism and rigid labor laws, and raise transparency to improve visibility of investment returns for investors. What Indonesia has achieved so far, by reining in government spending and subsidies that substantially brought down inflation, is a good example of the selffeeding virtuous circle-witness the strong performance of its bourse.

Over the next few years, we expect many labor-intensive manufacturing companies in China to move part of their operations overseas to diversify and lower manufacturing costs. Anecdotal evidence from our company visits points to the beginning of that trend, with Indonesia and Thailand being the recipients of FDI from China. For those ASEAN countries that can achieve strong FDI inflows from China and others, we expect the current rallies in their bourses will be just the first leg of a much stronger secular run.

Eoin Treacy's view Asia's high growth population centres have been a Fullermoney theme for the better part of a decade as the relentless rise of the global middle class continues unabated despite a severe recession in the USA and Europe. Most of Asia and commodity producing Latin America bypassed the credit excesses that fuelled the credit and sovereign crises and are in an ideal position to prosper in the current environment.

What happens in Indonesia is of importance because the market has been preeminent throughout the post-crash period and leaders tend to lead in both directions. When Indonesia eventually has a larger reaction it will likely be a warning for other markets as well. Right now, Indonesia remains in an impressively consistent medium-term uptrend but is becoming increasingly overextended relative to the 200-day MA. Reactions within the most recent five-month period have been shallow and a pullback of greater than 150 points would be required to begin to question the consistency of the advance. A larger reaction would be an inconsistency and would raise the potential that the next medium-term reversion towards the mean is getting underway.

Malaysia has paused below the psychological 1500 level for the last three weeks. The Index is reasonably overstretched relative to the 200-day MA but a sustained move below 1350 would be required to question scope for a successful breakout to new high ground.

Yesterday's key day reversal on the Thai market did not follow through today and the reaction is so far reasonably similar to that posted in September. Given the consistency of the advance and overextension relative to the 200-day MA, an MDL stop (as taught at The Chart Seminar) in the region of 920 appears appropriate for trading positions. A much wider stop would be appropriate for longer-term investors.

Singapore continues to extend the breakout from the 9-month range and a sustained move below 2850 would be required to question the consistency of the medium-term uptrend.

South Korea has led the Singapore market. It broke upwards in July, consolidated in the region of the high and has extended the breakout over the last month. A sustained move back below 1700 would be required to question the consistency of the medium-term uptrend.

Taiwan has been a relative underperformer but it rallied to break the progression of lower highs in September and is currently testing the April peak. A sustained move below 7700 would be required to check potential for additional upside.